Erie Insurance Exchange v. Columbia National Insurance Company ( 2013 )

IN THE COURT OF APPEALS OF TENNESSEE
AT NASHVILLE
October 24, 2012 Session
ERIE INSURANCE EXCHANGE v. COLUMBIA NATIONAL INSURANCE
COMPANY ET AL.
Appeal from the Chancery Court for Wilson County
No. 08323 Charles K. Smith, Chancellor
No. M2012-00331-COA-R3-CV - Filed January 30, 2013
This is a declaratory judgment action wherein one insurance company, which provided
general liability insurance coverage to the insured, asserts that another insurance company,
which provided the same insured with automobile insurance coverage, had the primary duty
to pay the cost of defending and to indemnify the insured in a third-party tort action filed
pursuant to Tennessee Code Annotated § 50-6-112. The plaintiff insurer asserts that the
defendant insurer had the primary duty to provide and pay the cost of the defense in that
action and to indemnify the insured pursuant to its automobile insurance policy because an
additional insured was operating a “boom truck” owned by the insured that was listed under
the defendant’s auto policy when the injury to the third-party plaintiff occurred. Both insurers
filed motions for summary judgment. The trial court denied the plaintiff’s motion and granted
summary judgment to the defendant insurer holding that the plaintiff, not the defendant, is
liable for providing and paying the cost of the defense and for indemnifying the insured in
the third-party tort action. We affirm.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Affirmed
F RANK G. C LEMENT, J R., J., delivered the opinion of the Court, in which P ATRICIA J.
C OTTRELL, P.J., M.S., and R ICHARD H. D INKINS, J., joined.
Gordon C. Aulgur, Nashville, Tennessee, for the appellant, Erie Insurance Exchange.
Joseph M. Huffaker, Nashville, Tennessee, for the appellee, Columbia National Insurance
Company.
OPINION
This appeal arises from an on-the-job injury to the employee of a subcontractor at a
construction site on October 31, 2005. On that date, Timothy Brewington, while working in
the course and scope of his employment for a subcontractor, was severely injured when the
metal crane on a boom truck that was hoisting sheet metal came into contact with overhead
electrical wires electrocuting Mr. Brewington.
Nashville Building Systems, Inc. (“NBS”) was the general contractor on the project,
which was the construction of a pre-fabricated building in Hendersonville, Tennessee. NBS
engaged Mike Miles as the subcontractor responsible for installing the sheet metal portion
of the building. Miles in turn employed Richard White to supervise Miles’s work. Miles also
employed Brewington.
The “boom truck,” a 1995 Ford flat-bed truck outfitted with a permanently attached
Manitex crane, was owned by NBS, and NBS gave Miles permission to use the boom truck
as needed on the project. Immediately prior to the accident, Miles instructed White to use the
crane on the boom truck to lift bundles of sheet metal and Brewington was directed to assist
White. While White was operating the crane, the crane came into contact with electrical
wires causing Brewington to be electrocuted because he was on or in contact with the truck
at the time.
Brewington was acting in the course and scope of his employment for Miles when he
was injured and Brewington recovered workers’ compensation benefits from Miles’s
workers’ compensation carrier, Liberty Mutual Insurance. Thereafter, Brewington filed a
third-party personal injury action against White (“Brewington v. White”) pursuant to
Tennessee Code Annotated § 50-6-112(a) of the Workers’ Compensation Act alleging that
White’s negligence caused Brewington’s injuries.
Erie Insurance Exchange (“Erie”) provided the defense for White pursuant to a Five
Star Contractors Policy, which was a general liability policy.
On July 25, 2008, Erie filed a Complaint for Declaratory Judgment against Columbia
National Insurance Company (“Columbia”).1 In the Complaint, Erie sought a declaration that
Columbia provided commercial automobile insurance for NBS, that the boom truck was
1
Erie also sued NBS, Brandon Powers, Timothy Brewington, Liberty Mutual Insurance Company,
and Richard White d/b/a Outright Construction Company in this declaratory judgment action. Erie then
settled Brewington v. White on behalf of White and Erie’s claims against these defendants were resolved and
voluntarily dismissed in Brewington v. White.
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identified in the policy as an insured vehicle, and, therefore, that Columbia had the primary
duty to defend and indemnify White under the auto policy because White was an additional
insured. Columbia answered denying that it had the primary duty to defend and to indemnify
White, asserting instead that Erie had the primary duty.
Erie and Columbia filed cross-motions for summary judgment. Erie asserted that there
were no genuine issues of material fact and it was entitled to summary judgment because
Columbia’s policy was illusory and Columbia should be estopped from denying coverage to
White because it listed the boom truck as a vehicle covered by the auto policy. In its motion,
Columbia agreed that no material facts are in dispute and asserted that it was entitled to
summary judgment as a matter of law because the workers’ compensation exclusion in its
policy barred coverage for liability arising under any workers’ compensation law, the
Employee Indemnification and Employer’s Liability Exclusion barred coverage for bodily
injury sustained by employees of the insured, and its policy excluded coverage for
automobiles while they were being used as mobile equipment.
Following a hearing on November 8, 2011, the trial court announced its ruling from
the bench. The court denied Erie’s motion for summary judgment2 and granted Columbia
summary judgment on one ground. The court concluded that Brewington’s claim against
White was barred by the Workers’ Compensation Act because Brewington’s claim was that
of a statutory employee against the statutory employer, NBS, which was insured by
Columbia. The court found that there was a genuine issue of material fact as to whether the
boom truck was covered as automobile or mobile equipment under the policy. The court
further found that White was an additional insured under the Columbia policy. Thus, it
denied Columbia’s motion for summary judgment on its additional two grounds. The order
was entered on February 3, 2011, denying Erie’s motion for summary judgment and granting
2
Instead of summarily dismissing Erie’s complaint when the trial court found that Erie was on the
losing side of the controversy, the trial court followed the proper protocol by making a ruling that afforded
relief from uncertainty with respect to their legal rights and responsibilities, as we stated in Cannon County
Board of Educ. v. Wade, 178 S.W.3d 725, 730 (Tenn. Ct. App. 2005):
The purpose of a declaratory judgment action is to resolve a dispute, afford relief from
uncertainty with respect to rights, status, and other legal relations. Snow v. Pearman, 436
S.W.2d 861, 863 (Tenn. 1968); Tenn. Code Ann. § 29-14-103 (2000). The fact that the party
seeking declaratory relief is not entitled to the judgment sought (that it is on the losing side
of the controversy) does not mean the parties are not entitled to the relief from uncertainty
that a declaratory judgment affords. Thus, a party seeking a declaratory judgment is not
required to allege facts in its complaint demonstrating that it is entitled to a favorable
decision [footnote and citation omitted]; see also State v. Brown & Williamson Tobacco
Corp., 18 S.W.3d 186 (Tenn. 2000) (holding the essential element to be a justiciable
controversy exists).
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Columbia’s motion. The court did not set forth any findings of fact or conclusions of law in
the order, but attached its November 8, 2011 ruling from the bench and incorporated that
ruling into its order. Both Erie and Columbia raise issues on appeal.
A NALYSIS
On appeal, Erie contends that the trial court erred as a matter of law when it held that
the Workers’ Compensation Statute provided an exclusive remedy at law and that since NBS
was the statutory employer, Erie was prevented from seeking coverage under Columbia’s
policy. Columbia contends that the trial court erred in denying its motion for summary
judgment on the applicability of the mobile equipment exclusion and the applicability of the
Employee Indemnification and Employer’s Liability exclusion.
I. W ORKERS’ C OMPENSATION S TATUTE AND E XCLUSION
Mr. Brewington was injured on the job while employed by subcontractor Miles; thus,
his rights of recourse are limited to those afforded under the Workers’ Compensation Act of
Tennessee. The comprehensive Workers’ Compensation Act of Tennessee extinguished
claims for on-the-job injuries that Tennessee employees had under the common law and
replaced those claims with exclusive statutory remedies. Tenn. Code Ann. § 50-6-108(a);
King v. Ross Coal Co., 684 S.W.2d 617, 619-20 (Tenn. Ct. App. 1984). However, Tennessee
Code Annotated § 50-6-112 affords Mr. Brewington, inter alia, the right to sue third-party
tortfeasors under limited circumstances. Without this expressed statutory remedy, an action
against a third-party tortfeasor, like Mr. White, would not be permissible. Thus, Mr.
Brewington’s entitlement, if any, to maintain a tort action against Mr. White, and Mr.
White’s liability, if any, are exclusive products of the workers’ compensation statutory
scheme. See Tenn. Code Ann. § 50-6-112; see also Queen Ins. Co. Am. v. Insurance Co. of
North America, 455 S.W.2d 149, 152 (Tenn. 1970) (explaining the applicability of a similar
workers’ compensation exclusion where the Tennessee workers’ compensation law was the
only source of liability).
The same statutory scheme that affords an injured employee the right to pursue an
action against a third-party tortfeasor affords the employer a right of subrogation against the
employee’s recovery from the third-party tortfeasor. and the employer, or its workers’
compensation insurer, may recoup the workers’ compensation benefits paid to the employee.
Tenn. Code Ann. § 50-6-112(c)(1) (2010).
Erie contends that the trial court erred as a matter of law when it held the workers’
compensation statute provided an exclusive remedy at law and that since NBS was the
statutory employer of Brewington, Erie was prevented from seeking coverage under
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Columbia’s policy. Conversely, Columbia insists its insured, NBS, is the statutory employer
of Brewington, thus, Brewington is a statutory employee of NBS, which is fatal to Erie’s
claim.
Realizing the number of layers of contractors and subcontractors separating the
general contractor, NBS, from Mr. White and Mr. Brewington, it is difficult to see the
employment chain without a listing.3 Thus, we provide such listing below.4
Nashville Building Systems
• NBS is the General Contractor hired by Owner to Construct Building
• NBS is insured by Columbia under three policies, including the Auto Policy
• NBS owned the boom-truck loaned/leased to Miles
Mike Miles
• Miles is a Subcontractor to NBS
• Miles is the direct employer of Mr. Brewington
• Miles leased or borrowed the boom truck from NBS
• Miles is an additional insured under the NBS/Columbia Auto Policy
• Miles employed White to do part of Miles’s work on NBS project
Richard White d/b/a Outright Construction Co.
• White was employed by Miles to work on the NBS project
• White operated the boom truck at Miles’s direction
3
The employment chart reminds us of nineteenth-century burlesque sketches that used plays on words
and names, which were made famous in the 1930’s by Bud Abbott and Lou Costello. Wikipedia, Who’s on
First?, http://en.wikipedia.org/wiki/Who%27s_on_first (last visited Jan. 8, 2013). The premise of their
routine was that Abbott is identifying players on a baseball team to Costello, but their names and nicknames
can be interpreted as non-responsive answers to Costello’s questions. Id. In this context, the first baseman
is named “Who”; thus, the utterance “Who’s on First” is ambiguous between the question (“which person
is the first baseman?”) and the answer (“The name of the first baseman is ‘Who’”). Id. The names given in
the routine for the players at each position are: First Base: Who; Second Base: What; Third Base: I Don't
Know; Left field: Why; Center field: Because; Pitcher: Tomorrow; Catcher: Today; and the Shortstop: I
Don’t Care. Id. The name of the shortstop was not given until the end of the routine, and the right fielder was
not identified. Id.
4
This chart was submitted as an exhibit to Columbia’s Motion for Summary Judgment.
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• White is an additional insured under NBS/Columbia Auto Policy
• White was operating boom truck when Brewington was injured
• Brewington sues White as third-party tortfeasor under Tenn. Code Ann. § 50-6-112
• White is insured under Erie’s Commercial General Liability Policy
As the foregoing chart illustrates, Brewington and White were employees of Miles,
and they were acting in the course and scope of their employment for Miles at the time of the
injury to Brewington. Miles was a subcontractor of NBS at the time of the injury. Thus, NBS
was Brewington’s statutory employer. Tenn. Code Ann. § 50-6-113 (2010). Because NBS
was Brewington’s statutory employer, we affirm the trial court’s decision to grant
Columbia’s motion for summary judgment on this issue.
II. M OBILE E QUIPMENT E XCLUSION
For its part, Columbia contends the trial court erred in denying its motion for summary
judgment on the applicability of the mobile equipment exclusion. The trial court denied
Columbia’s motion for summary judgment on this issue based upon the trial court’s
determination the motion presented a question of fact and material facts were in dispute. We
have determined that the trial court erred when it concluded that this issue presented a
question of fact instead of a question of law. Our determination is guided by the court’s
analysis in Standard Fire Ins. Co. v. Chester O'Donley & Associates, Inc., 972 S.W.2d 1(Tenn. Ct. App. 1998), which held that:
Questions involving an insurance policy’s coverage and an insurer’s duty to
defend require the interpretation of the insurance policy in light of claims
asserted against the insured. See Drexel Chem. Co. v. Bituminous Ins. Co., 933
S.W.2d 471, 480 (Tenn. Ct. App. 1996); American Nat’l Property & Cas. Co.
v. Gray, 803 S.W.2d 693, 695–96 (Tenn. Ct. App. 1990). A declaratory
judgment proceeding provides an appropriate vehicle for deciding coverage
questions. See Allstate Ins. Co. v. Merritt, 772 S.W.2d 911, 912 (Tenn. Ct.
App. 1989).
Issues relating to the interpretation of written contracts involve legal rather
than factual issues. See Rapp Constr. Co. v. Jay Realty Co., 809 S.W.2d 490,
491 (Tenn. Ct. App.1991); Taylor v. Universal Tire Inc., 672 S.W.2d 775, 777
(Tenn. Ct. App.1984). Accordingly, issues relating to the scope of coverage
and an insurer’s duty to defend likewise present questions of law. See Pile v.
Carpenter, 118 Tenn. 288, 296, 99 S.W. 360, 362 (1907); Pennsylvania
Lumbermens Mut. Fire Ins. Co. v. Holt, 32 Tenn. App. 559, 566, 223 S.W.2d
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203, 206 (1949). These essentially legal questions can be resolved using a
summary judgment when the relevant facts are not in dispute. See St. Paul Fire
& Marine Ins. Co. v. Torpoco, 879 S.W.2d 831, 834 (Tenn.1994); Rainey v.
Stansell, 836 S.W.2d 117, 118 (Tenn. Ct. App.1992).
Id. at 5-6.
The general rules of construction of insurance policies are succinctly stated in
Standard Fire Ins. Co.:
Insurance contracts are subject to the same rules of construction and
enforcement as contracts generally. See McKimm v. Bell, 790 S.W.2d 526, 527
(Tenn.1990); Hurley v. Tennessee Farmers Mut. Ins. Co., 922 S.W.2d 887,
892 (Tenn. Ct. App.1995). In the absence of fraud or mistake, they should be
interpreted as written, see Allstate Ins. Co. v. Wilson, 856 S.W.2d 706, 708
(Tenn. Ct. App.1992), and their terms should be given their natural and
ordinary meaning. See Tata v. Nichols, 848 S.W.2d 649, 650 (Tenn.1993);
Drexel Chem. Co. v. Bituminous Ins. Co., 933 S.W.2d at 477. Because insurers
are strictly accountable for the language in their contracts, ambiguous language
will be construed against the insurer and in favor of the insured. See Harrell
v. Minnesota Mut. Life Ins. Co., 937 S.W.2d 809, 814 (Tenn.1996).
Insurance policies should be construed as a whole in a reasonable and logical
manner. See English v. Virginia Sur. Co., 196 Tenn. 426, 430, 268 S.W.2d
338, 340 (1954); Setters v. Permanent Gen. Assurance Corp., 937 S.W.2d 950,
953 (Tenn. Ct. App.1996). The essential components of a general liability
insurance policy include (1) the declarations, (2) the insuring agreements and
definitions, (3) the exclusions, (4) the conditions, and (5) the endorsements.
When coverage questions arise, these components should be construed in the
above order to avoid confusion and error. See Tinker, 25 Fed’n Ins. Counsel
Q. at 222; Long, § 10.04.
The insuring agreement sets the outer limits of an insurer’s contractual
liability. If coverage cannot be found in the insuring agreement, it will not be
found elsewhere in the policy. Exclusions help define and shape the scope of
coverage, but they must be read in terms of the insuring agreement to which
they apply. Exclusions can only decrease coverage; they cannot increase it. See
Stanford Ranch, Inc. v. Maryland Cas. Co., 89 F.3d 618, 626 (9th Cir.1996);
Continental Cas. Co. v. Pittsburgh Corning Corp., 917 F.2d 297, 300 (7th
Cir.1990); Maimone v. Liberty Mut. Ins. Co., 302 N.J. Super. 299, 695 A.2d
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341, 344 (1997); 13 John A. Appleman & Jean Appleman, Insurance Law and
Practice § 7387, at 175 (1976).
Exclusions should also be read seriatim. Each exclusion reduces coverage and
operates independently with reference to the insuring agreement. See Trinity
Universal Ins. Co. v. Broussard, 932 F. Supp. 1307, 1310 (N.D. Okla.1996);
Hartford Accident & Indem. Co. v. A.P. Reale & Sons, Inc., 228 A.D.2d 935,
644 N.Y.S.2d 442, 443 (1996). Exclusions should not be construed broadly in
favor of the insurer, nor should they be construed so narrowly as to defeat their
intended purpose. See Midland Ins. Co. v. Home Indem. Co., 619 S.W.2d 387,
389 (Tenn. Ct. App.1981). Once an insurer has established that an exclusion
applies, the burden shifts to the insured to demonstrate that its claim fits within
an exception to the exclusion. See Just v. Land Reclamation, Ltd., 151 Wis. 2d
593, 445 N.W.2d 683, 688 (1989), rev’d on other grounds, 155 Wis. 2d 737,
456 N.W.2d 570 (1990).
Id. at 7-8.
The relevant insuring provisions in the Columbia auto policy state:
We will pay all sums an “insured” legally must pay as damages
because of “bodily injury” . . . caused by an accident and
resulting from the ownership, maintenance or use of a covered
auto.
The “Certain Trailers, Mobile Equipment and Temporary Substitute Autos” provision
states:
If Liability Coverage is provided by this Coverage Form, the
following types of vehicles are also covered “autos” for Liability
Coverage:
1. . . . .
2. “Mobile Equipment” while being carried or
towed by a covered “auto”.
The policy defines “auto” as follows:
B. “Auto” means a land motor vehicle . . . but does not include “mobile
equipment”.
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The policy defines “Mobile Equipment” as:
“Mobile equipment” means any of the following types of land
vehicles, including any attached machinery or equipment:
1...
4. Vehicles, whether self-propelled or not,
maintained primarily to provide mobility to
permanently mounted:
a. Power cranes . . . .
Auto policies and commercial general liability (“CGL”) policies are created to cover
different risks, and so bring cost and efficiency benefits by eliminating the duplicate
premiums that would be paid were the risks not separated. Am. Star Ins. Co. v. Ins. Co. of the
West, 284 Cal. Rptr. 45, 49 (Cal. Ct. App. 1991). To accomplish that, auto policies and CGL
policies frequently contain “reciprocal exclusions for autos and mobile equipment.” Id.
Columbia’s Auto Policy excludes coverage for mobile equipment except when it is being
transported by a covered auto. A majority of jurisdictions that have considered the issue
before us have held that only when the vehicle is being driven does it come within the
coverage provided by an auto policy. See Home Indem. Co. v. Transp. Indem. Co., 69 Cal.
Rptr. 504 (Cal. Ct. App. June 13, 1968); Russo v. Veran, Inc., 488 So. 2d 372 (La. Ct. App.
1986); Waldbillig v. State Farm Mut. Auto. Ins. Co., 321 N.W.2d 49 (Minn. 1982); Alfa Ins.
Co. v. Ryals, 918 So. 2d 1260 (Miss. 2005); Progressive Cas. Inc. Co. v. Yodice, 694
N.Y.S.2d 281 (N.Y. Sup. Ct. 1999); D & M Logging Co. v. Huffman, 427 S.E.2d 244 (W. Va.
1993); Smedley v. Milwaukee Auto Ins. Co., 107 N.W.2d 625 (Wis. 1961); State Farm Mut.
Auto. Ins. Co. v. Farmers Ins. Group, 569 P.2d 1260 (Wyo. 1977). The substance of the rule
is that mobile equipment like the boom truck in this case often has a dual function. State
Farm, 569 P.2d at 1262.
Therefore, “while being driven from place to place [the boom truck] is an automobile
because under those circumstances it is like any other truck carrying any other load from one
point to another . . . [c]onversely[] . . . when set up in place to perform its primary function
[the boom truck] is no longer an automobile, but at that point and at that time it is being used
for its other designed function . . . [and] it then no longer is to be considered an automobile
or mother vehicle under the definitional terms of the policy.” Id.
Furthermore, the majority rule has been applied in circumstances where – as here –
the declarations identified the vehicle in question. Schmidt v. Luchterhand, 214 N.W.2d 393(Wis. 1974). In that case, the court reasoned that the “ordinary meaning of the term ‘motor
vehicle’ as it applied to the 1962 truck would not include the permanently attached hoist . .
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. [and] that referring to the 1962 truck as a motor vehicle would not be commonly understood
as indicating an intent to include the hoist as it was being used in the instant case.” Id. at 396.
Considering the foregoing, we find the majority rule sound and wholly consistent with
Tennessee jurisprudence on the issue of automobile insurance; thus, we shall apply the
majority rule in this case.
As this court stated years ago in Standard Fire Ins. Co., 972 S.W.2d at 11, all that
remains is to determine whether Columbia has a duty to defend NBS with regard to the
claims made by Erie as subrogee of Mr. Brewington. Id.
This duty is measured by the factual allegations in the counterclaims. See First
Nat’l Bank v. South Carolina Ins. Co., 207 Tenn. 520, 523, 341 S.W.2d 569,
570 (1960); Drexel Chem. Co. v. Bituminous Ins. Co., 933 S.W.2d at 480; I.
Appel Corp. v. St. Paul Fire & Marine Ins. Co., 930 S.W.2d 550, 552 (Tenn.
Ct. App.1996). An insurer’s duty to defend is triggered when its policy
arguably, as opposed to distinctly, covers the claims being made, see Hamlin,
Inc. v. Hartford Accident & Indem. Co., 86 F.3d at 94; O’Bannon v. Aetna
Cas. & Sur. Co., 678 S.W.2d 390, 392 (Ky.1984); Dempster Bros. Inc. v.
U.S.F. & G., 54 Tenn. App. 65, 71, 388 S.W.2d 153, 156 (1964), and
continues until the facts and the law establish that the claimed loss is not
covered. See James Graham Brown Found., Inc. v. St. Paul Fire & Marine Ins.
Co., 814 S.W.2d 273, 279 (Ky. 1991).
Id.
We, therefore, shall examine the Columbia policy to determine if the auto policy
arguably covers Erie’s claims against NBS. The Columbia auto policy states that liability
coverage is provided for the types of vehicles covered as “autos” for liability coverage
including “Mobile Equipment” while being carried or towed by a covered “auto.” The policy
then defines auto as: “a land motor vehicle . . . but does not include “mobile equipment.” The
policy goes on to define mobile equipment as “any of the following types of land vehicles,
including any attached machinery or equipment: 4. Vehicles, whether self-propelled or not,
maintained primarily to provide mobility to permanently mounted: a. Power cranes . . . .”
The injury to Mr. Brewington occurred when the boom truck was immobilized, the
wheels were lifted off of the ground, and it was only being used as a power crane to lift
heavy materials. As a consequence, the boom truck was not being used as “a land motor
vehicle” at the time of Mr. Brewington’s accident, it was being used as a power crane, which,
by definition, makes it “mobile equipment” under the policy. Thus, pursuant to the clear and
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unambiguous language of Columbia’s auto policy, the boom truck was not insured when Mr.
Brewington was injured on the construction site. Thus, Columbia’s motion for summary
judgment on this issue should be granted.
As we have found two grounds upon which Columbia is entitled to summary
judgment in this case, it is unnecessary for us to address Columbia’s last issue, the
applicability of the Employee Indemnification and Employers Liability exclusion. Thus, we
shall not discuss this remaining issue.
In Conclusion
The judgment of the trial court is affirmed, on the same as well as an additional
ground, and this matter is remanded with costs of appeal assessed against the Appellant, Erie
Insurance Company.
______________________________
FRANK G. CLEMENT, JR., JUDGE
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